I’m an avid income investor. I focus a lot of my attention on finding companies that can supply me with an above-average, steadily rising income stream. Investing in high-quality, high-yielding dividend stocks is the foundation of my strategy to grow my passive income streams to the point where they’ll cover my recurring expenses.
Brookfield Infrastructure (NYSE: BIP)(NYSE: BIPC) is one of my favorite income stocks. I’m routinely adding to my position in the leading global infrastructure operator. Here’s why I keep buying the top-notch, high-yield dividend stock hand over fist.
A rock-solid income stream
Brookfield Infrastructure operates a globally diversified portfolio of infrastructure businesses that generate very stable cash flow. Its utilities, transport, midstream, and data infrastructure assets get 90% of their earnings from predictable long-term, fee-based contracts or government-regulated rate structures, with an average remaining term of 10 years. Meanwhile, 70% of its cash flow has no volume or price exposure, and 85% is either protected from or indexed to inflation.
The company targets to pay 60% to 70% of its stable cash flow in dividends each year. That payout currently yields over 5.5%, putting it several times above the S&P 500’s 1.3% dividend yield.
Brookfield further protects its payout with a strong balance sheet. It has a solid investment-grade credit rating; primarily long-term, fixed-rate debt; and lots of liquidity. The company also routinely recycles capital to maintain strong liquidity levels.
The global infrastructure giant’s combination of stable cash flow, healthy dividend payout ratio, and rock-solid balance sheet put its high-yielding dividend on a very firm foundation.
Lots of fuel to continue growing
Brookfield Infrastructure has increased its dividend every year since coming public in 2009, delivering 9% compound annual growth. That steady upward trend should continue, with the company targeting 5% to 9% annual dividend growth over the long term.
The infrastructure company has several growth drivers to support that plan. Brookfield estimates that inflation-indexed rate increases, volume growth as the global economy expands, and its large backlog of expansion projects should support 6% to 9% growth in its funds from operations (FFO) per share each year.
In addition to those organic growth catalysts, Brookfield believes its capital recycling strategy will continue to drive its FFO growth rate into the double digits. The company routinely sells mature assets and redeploys the proceeds into higher-returning new investments. This year, it has raised $1.2 billion through capital recycling activities. That gives it the funds to support several new investments, including acquiring 78,000 telecom sites in India and 40 data centers out of bankruptcy in North America. Meanwhile, the company has a full pipeline of new investment opportunities it’s pursuing.
Income and growth for a bargain price
Brookfield Infrastructure offers such a high dividend yield mainly because it has a dirt cheap valuation. The company expects to grow its FFO per share by more than 10% this year from last year’s level of $2.95 per share. That outlook implies its FFO should rise to over $3.25 per share this year. With shares recently trading at less than $30 apiece, Brookfield sells for less than 10 times its FFO.
That’s an extremely low valuation. For perspective, the S&P 500’s forward P/E ratio is currently around 21.5 times. With Brookfield Infrastructure growing at a double-digit rate, it trades at a price-to-growth (PEG) ratio of less than 1.0 times — a rare find.
It checks all the boxes for me
Brookfield Infrastructure has grown into one of my top income producers over the years. That’s due to its steadily rising payout and my decision to continually add to my position. I plan to keep buying shares of this income juggernaut in the future, especially if it remains at such a dirt cheap valuation.
Should you invest $1,000 in Brookfield Infrastructure Partners right now?
Before you buy stock in Brookfield Infrastructure Partners, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Brookfield Infrastructure Partners wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $671,728!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of June 3, 2024
Matt DiLallo has positions in Brookfield Infrastructure Corporation and Brookfield Infrastructure Partners. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.
Why I Keep Buying This Top High-Yield Dividend Stock Hand Over Fist was originally published by The Motley Fool
Signup bonus from
